Malaysia Airlines may be taken over by government or enter bankruptcy

Jamie Freed

Ailing carrier Malaysia Airlines may be taken private by its major government shareholder or enter bankruptcy protection to allow it to renegotiate contracts with unions.

Bloomberg on Monday cited people familiar with the matter as saying those would be among the turnaround options presented by the airline’s board to its majority shareholder, Khazanah Nasional, this week.

The potential restructuring comes as the airline reported its passenger numbers and percentage of seats filled fell in June, even before the latest disaster hit the financially troubled airline.

The airline’s load factor, or percentage of seats filled, fell to 76.8 per cent in June, down from 84.3 per cent the prior year, according to Bloomberg. However, the June load factor was an improvement on the 68.9 per cent load factor reported in May.

Malaysia Airlines, which was loss-making even before the disappearance of MH370 in March, had offered low fares after the incident to help fill seats.

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There was evidence the strategy was working. MH17, the flight that was shot down over eastern Ukraine last week, had been overbooked and was completely full.

The number of passengers in June fell by 3.1 per cent to 1.46 million – a lesser rate than the load factor – as the airline has expanded capacity significantly over the last year, including on routes to Australia.

Malaysia Airlines is allowing full refunds even on non-refundable tickets for travel through December 31 so long as it is notified by Thursday.

The airline’s future is unclear. Khazanah had been expected to announce a plan to revive the airline within the next six to 12 months even before MH17 was shot down. Maybank analyst Moshin Aziz last month estimated the carrier would need another equity injection by mid-2015.